The technical setup on USDCAD suggests that the currency pair may soon revisit its multi-year highs after labor data from Canada shows record number of job losses in March. As of this writing, the currency pair is down over 370 pips from its weekly high.
According to Statistics Canada, over 1.01 million lost their jobs in March. Like the US NFP report, the official government data came in well below expectations. Analysts had braced for a more modest number of job loss at 427,000. Consequently, this number translated to an uptick in Canada’s unemployment rate. For March, the rate of joblessness was at 7.8% which is significantly higher than the 5.6% reading for February. It also topped expectations which were for a 7.4% reading.
This labor market report reflects the growing challenges to Canada’s economy. Aside from the coronavirus pandemic forcing business closures and lay-offs, the country is also hit hard by the crash in crude oil price. The commodity is one of Canada’s largest exports. Since the oil price war which began in March, the country’s oil industry has been struggling. This is because lower crude oil prices translates to lower industry revenue.
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USDCAD Outlook
With this, it is therefore not surprising to see a bullish setup on USDCAD materialize.
On the daily time frame, it can be seen that USDCAD retraced some of its gains back to the 38.2% Fib level (when you draw the Fibonacci retracement tool from the low of December 31 to the high of March 19). The currency pair also looks to have formed a falling wedge chart pattern which is characterized by a consolidation with a downward slope. This chart pattern is typically considered as bullish. A break above the high of April 6 at 1.4260 could mean that USDCAD is on its way to retest its recent peak at 1.4666.
On the other hand, a close below yesterday’s low at 1.3930 could mean that the currency pair is headed lower. Near-term support is at 1.3445 where the 100 SMA is.
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